MultiChoice Plans To Beat Newcomers With Enhanced Pay-TV Package

Many satellite operators view Africa as a potential growth market. Last month, SES Astra announced that it was extending its provision of state-of-the-art satellite services to the entire African continent in a major new initiative.

The market is already seeing innovative satellite services. The catalyst for pay-TV across the region is MultiChoice Africa, which offers satellite pay-TV to nearly 50 countries across Africa and the Indian Ocean islands. MultiChoice operates from three satellites over Africa, including the C-band PAS 10 satellite, which covers the whole of Africa; the Ku-band Eutelsat W4 satellite, which goes from Senegal in the West to Mauritius in the East; and the Ku-band PAS 7 satellite, which covers southern Africa.

MultiChoice already has more than a million digital subscribers across the continent, with the majority of these being in South Africa, and it is flying the flag for pay-TV in Africa as a whole.

Recently speaking with Satellite News, Nolo Letele, the CEO of MultiChoice, talked about pay-TV in Africa and how the operator is looking to target new markets on the continent.

Satellite News: How do you view the competitive landscape in South Africa?

Letele: There is no cable of any kind in South Africa. I think it is just a function of the open spaces, and it was never really developed; you don’t get these high- capacity type dwellings that you do elsewhere. Currently, we are the only pay-TV operator in the country, but we see competition coming in next year, and it will probably be another digital satellite operator. It will probably aim for the middle-income segments of the population; that’s what I would do if I were launching a new TV service.

Digital terrestrial television (DTT), from a pure regulatory point of view, will not be operational next year but, in 2006, I think we will see DTT entrants, probably with a similar strategy to the one I just recounted.

Satellite News: How many digital subscribers do you have in South Africa? How are you going to look to make the digital TV packages more attractive to consumers?

Letele: In South Africa, we have 820,000 digital subscribers but we broadcast to the whole of sub-Saharan Africa. Outside of South Africa, we have around 300 000 digital subscribers. Our digital offering, called DStv, has a pretty strong lineup, which is fairly similar to the other line-ups elsewhere. It is driven by premium movies and sports. It contains 60 video channels, 19 radio channels and 40 DMX music channels — a pretty good offering to subscribers.

In terms of future growth, it is increasingly coming from the emerging Black market, which represents the slightly lower end of the market. However, there is quite a lot of mobility in terms of the Blacks into the higher income levels. In addressing the Black market, we added some other channels, including MTV, ActionX (action movies) and Channel O – a locally produced music channel containing international, pan-African and South African music videos.

Satellite News: How are you coping with all the external challenges that affect new technology and services?

Letele: I think on the one hand, the regulatory regime is going to be key in terms of opening up the industry, and allowing for growth and investment. By that, I am talking about convergence legislation, which is being drafted, as well as regulation of broadcast subscription television. There currently is an inquiry taking place in Africa, which will result in legislation that will govern the pay-TV industry. I think enlightened, enabling regulation is going to be key.

Having said that, the challenge is that I see the entrance of other players on other platforms, as well as the likes of ADSL and wireless broadband. I think all of these and personal video recorders (PVRs) down the line mean that, in three to five years, conventional satellite pay-TV will be facing some very serious challenges. We have to look at those alternatives and see whether we can play on those platforms.

Satellite News: Some satellite pay-TV operators in Europe, like BSkyB and Canal Satellite, already offer PVR services. When will it be realistic for MultiChoice to start offering PVR?

Letele: PVR is very much part of our strategy going forward, and we’ve already commissioned the development of PVRs for this market. We will be launching this product in the 3Q05.

PVR is particularly key for us, as there is currently an explosion of DVD players in South Africa and, lately, DVD recorders. We feel we need to launch as quickly as possible because the DVD recorders are not addressable by the operator. We need to be able to download movies on an on-demand basis to the subscriber’s box.

And people would have to buy the box instead of renting it, although I don’t foresee that being a major obstacle. Last year, we launched a dual-view box that allows you to watch one channel in one room and another in another room. That has actually sold very well. The take-up is largely from existing subscribers, and the same will apply for the PVR.

Satellite News: What are the major content challenges?

Letele: Content is really about ensuring that we continue to have premium movies and sports on an exclusive basis. There is a lot of competition with local Free-To-Air (FTA) players for sports rights. For movies, we don’t compete with the FTAs because they are in the pay-TV window. Our relationships with studios are very important, and it is important to continue to secure these rights.

Locally produced channels are another important component, and there is definitely a market interest. A few channels are produced by our local sister company, M-Net. One is an Afrikaans-language channel, called KykNet, and the other channel, ‘O,’ is produced locally; it includes local as well as pan-African artists.

Secondly, reality TV is very big here. We have to continue to reinvent ourselves in terms of what to offer here, and we launched our own show, ‘The Block,’ last month. The more we can continue to provide reality TV, the better for us.

Satellite News: What are your pricing strategies for new digital-TV packages? Are you looking to target specific market segments?

Letele: Our system is very different than what you would find with Sky. We have one massive basic tier, which really contains all the channels, and that has been the basis of our offering. It is one price for one bouquet. But clearly, as we embark on our emerging-market strategy, we are looking at a possible offering with a smaller number of channels, maybe 10 or 12 channels at a lower price that will assist in the growth of that emerging market. We are looking at introducing this early next year.

Satellite News: Does the company have any balance sheet issues? What are MultiChoice’s main capital-expenditure plans?

Letele: We have a very healthy balance sheet, and we are profitable. When it comes to capital expenditures looking forward, we are introducing a cheaper decoder later this year, around November, that will target the emerging Black market. And besides PVR, we are looking at HDTV down the line.

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